* German has state vote in Jan, federal elections in Sept
* Merkel wants coalition unity on welfare, tax disputes
* Finance minister has limited scope for tax "gifts"
By Stephen Brown
BERLIN, Nov 2 German Chancellor Angela Merkel is
under pressure to resolve a dispute on taxes and welfare between
her centre-right coalition partners this weekend in order to
present a united front before elections in 2013.
The challenge for Merkel's conservatives and their junior
Free Democrat (FDP) partners is to ensure that any compromise
on rival welfare proposals does not threaten the government's
ambitious goal of balancing the budget by 2014.
She must also deflect accusations from the centre-left
opposition that she is attempting to bribe German voters before
next September's elections and a state vote in Lower Saxony in
The opposition says it is no coincidence that a meeting of
coalition leaders on Sunday evening takes place without her
feisty finance minister, Wolfgang Schaeuble, who will be in
Mexico for a G20 meeting.
"Angela Merkel's coalition is going to dish out election
gifts. She is taking the precaution of doing this without the
finance minister being present," said Thomas Oppermann, the
parliamentary floor leader of the Social Democrats (SPD).
But Schaeuble has also taken precautions, limiting scope for
fiscal largesse by committing this week to a structurally-
balanced budget by 2014, two years before the "debt brake" law
stipulates that Germany must reach this goal.
Tax-cut enthusiast Michael Fuchs, a lawmaker from Merkel's
Christian Democrats (CDU), pleaded this week: "When, if not now,
should the coalition give people some real relief?"
Hoping to muzzle such talk, Schaeuble presented new tax
estimates for 2013 to 2016 this week showing the above-estimate
revenue growth of recent years that has led to record levels of
income will ease from next year as the German economy slows.
That should ensure that, beyond adjustments in welfare and
pension contributions that may be agreed on Sunday by the CDU,
its Bavarian sister party the CSU and the FDP, there will be no
dramatic tax cuts threatening Schaeuble's fiscal ambitions.
In a rare moment of harmony with Schaeuble, FDP leader and
economy minister Philipp Roesler agreed that "the tax estimates
show times are getting harder, making it even more important to
ensure our budget is crisis-proof".
The German government has slashed its 2013 GDP growth
forecast to 1.0 percent from 1.6 percent as the euro zone
crisis, along with slower global growth, take their toll on
Europe's biggest economy.
"A BIT OF A SHOW"
SPD budget expert Carsten Schneider still fears Merkel will
use tax windfalls as "putty" to keep her coalition together.
Merkel's 2009 decision to swap a "grand coalition" with the
SPD for an alliance with the FDP has plagued her second term.
The FDP has suffered a string of local election defeats and
squabbled with Bavarian state premier Horst Seehofer's CSU.
One stone of discord has been the CSU's proposal for extra
child benefit payments for parents who keep their toddlers at
home, in the context of scarce state kindergarten places.
Critics say this would keep women out of the workplace and
children of poorer immigrants out of kindergartens where they
would learn German and integrate. The FDP also argues that it
places an additional burden on state finances.
But the benefit was written into the 2009 coalition deal and
the FDP may now cede - if the conservatives agree to scrap an
unpopular health surcharge of 10 euros per quarter for visits to
the doctor. Meant to reduce unnecessary appointments, critics
say it just keeps low earners away and generates red tape.
FDP whip Rainer Bruederle said it could be financed from the
large surpluses held by obligatory health insurance schemes,
which he said were starting to resemble "savings banks".
The coalition will also discuss state pension contributions
and the cost to households of the switch to renewable energy.
But political scientist Gero Neugebauer said the meeting of
Merkel, Seehofer, Roesler and their party lieutenants was less
about economics than patching over political differences.
"They will put on a bit of a show before the election in
January in Lower Saxony. But anything they agree that has any
impact on government finances will only be provisional because
Schaeuble has to approve it and he won't be there," he said.
(Additional reporting by Erik Kirschbaum, Andreas Rinke and
Thorsten Severin; Writing by Stephen Brown, Editing by Gareth
Jones and Angus MacSwan)